news

tencent news "periscope"

author: ji zhenyu

editor｜liu peng

pavel durov, founder of the social application telegram, was suddenly arrested in france recently, causing a huge uproar.

this social platform built around the instant messaging application telegram, with more than 950 million monthly active users, hides a huge cryptocurrency business behind it. according to telegram's 2023 annual financial report signed and confirmed by durov himself, obtained by tencent news "qianwang", the cryptocurrency business has become telegram's largest revenue business, accounting for nearly 50% of revenue, and has supported half of the business outside of pure social business.

the end-to-end encrypted communication used by the telegram application makes it a natural match with the decentralized cryptocurrency field. countless cryptocurrency projects have chosen telegram as their own communication and social platform. telegram itself has also actively participated in them. the toncoin it developed has become the official digital cryptocurrency that can be traded and circulated on the platform. once launched, it has been sought after by platform users.

however, durov's sudden arrest cast a shadow on telegram's cryptocurrency business. after the news came out, the price of toncoin plummeted, falling by more than 20% in a week, and telegram, which was deeply bound to toncoin, was in trouble.

in addition to social business, cryptocurrency business accounts for half of the market

most people's understanding of telegram remains as an instant messaging social application tool, but a recently disclosed financial statement of telegram reveals more unknown sides of this social company.

if we only look at the revenue structure, it is not an exaggeration to regard telegram as a cryptocurrency company. the financial report shows that in 2023, telegram's revenue related to cryptocurrency business accounted for nearly 50%.

the income statement, signed by the founder of telegram and audited by the dubai branch of accounting firm pwc, shows that telegram achieved revenue of us$342 million in 2023, but suffered an operating loss of us$108 million during the same period.

under the operating loss column, the statement separately lists an item called "gains and losses from revaluation of digital assets", which recorded a profit of us$502,000 in 2023 and a loss of us$2.432 million in 2022.

under the item "excluding profits and losses", telegram's "digital asset revaluation gains" in 2023 reached us$85.996 million and us$17.043 million in 2022.

combined with telegram's balance sheet, we can further learn that in 2023, telegram's book holdings of "digital assets" reached us$399 million, and in 2022 it was us$106 million.

according to current accounting standards, the way to handle digital currency assets is to record the cost of "intangible assets" in the asset item, and then conduct an "impairment test" every quarter. if the price of digital assets falls in that quarter, a corresponding "impairment" needs to be made, and if the asset price rises, no corresponding "appreciation" can be made.

this accounting treatment is also the common treatment in the industry. for example,teslathe large amount of bitcoin assets held by micro strategy are all included in items such as "intangible assets".

however, at the end of 2023, the u.s. financial accounting standards board (fasb) issued a guideline to improve the accounting treatment of digital currency assets. the guideline is scheduled to take effect on december 15, 2024. the core content is that digital assets can be valued at fair value in the future, and the corresponding price changes will be included in the profit and loss of each period.

therefore, combined with the above disclosures about the "digital assets" item in telegram's balance sheet and income statement, it can be roughly concluded that telegram has adopted this new accounting standard in its 2023 financial report, and included changes in the fair value of the digital currency assets held in profit and loss, thus resulting in the item "digital asset revaluation gains and losses".

from the perspective of revenue composition, of telegram's full-year revenue of us$342 million in 2023, us$130 million came from the "integrated wallet" project, accounting for 38% of revenue. this project is also a new business in 2023. this column was completely blank in 2022.

telegram further explained its digital wallet business as a software program that allows users to store, send, receive and trade crypto assets.

for the year ended december 31, 2023, telegram recognized revenue from the application program interface for the digital integrated wallet integrated into the telegram application when it was provided to the open network foundation and received exclusive services from ongoing access by telegram users to the integrated wallet through a menu within the telegram application.

telegram generally provides services related to the digital integrated wallet on a prepaid basis and there is no financing component as the services are provided within 12 months of payment.

in addition to the digital integrated wallet business, related to the cryptocurrency business is the "sale of collectibles". telegram said that these collectibles are mainly user names, virtual phone numbers, etc. the corresponding revenue is confirmed when the corresponding items are delivered to the user. the revenue from this part will be us$17.816 million in 2023 and us$91.742 million in 2022.

adding the two businesses of "digital integrated wallet" and "collectible sales" together, the revenue share in 2023 will reach 43%. in 2022, since telegram does not have a "digital integrated wallet" business, the only item related to the cryptocurrency business is "collectible sales", which accounts for 40% of the revenue.

in addition, another major source of income for telegram is telegram paid subscriptions, which reached us$94.09 million in 2023, a more than five-fold increase compared to 2022. since this is a new revenue business launched by telegram in june 2022, only half of the revenue in 2022 was included. based on the free version, this service gives paying users more functions and benefits. since there are currently 700 million users on the telegram platform, this part of the revenue is also considerable, accounting for 27.5% of the revenue.

other revenues also include advertising revenue and paid services for access to advertising platforms, with revenues of us$70.572 million and us$30 million in 2023, respectively.

combining the above revenue structure, it is not difficult to see that the digital currency business has already supported half of telegram's instant messaging social business, and the core of all this revolves around the digital cryptocurrency toncoin.

founderbehind barstoncoin price volatility raises concerns

toncoin was first developed by telegram itself, but due to regulatory obstacles in the united states, toncoin is now maintained and developed by the open source community. the digital currency assets currently held by telegram are toncoin. according to the disclosure of the 2023 balance sheet, telegram holds $399 million in toncoin. toncoin has become a currency that can be freely circulated for payment and transactions on the telegram platform. users can purchase telegram premium services through toncoin.

for example, in november 2023, telegram founder durov used toncoin to pay for $300,000 worth of telegram premium subscription services to be given to users on the platform.

but like almost any digital currency, the price of toncoin has also experienced significant fluctuations, especially after the news of durov's arrest by french police, the price of toncoin plunged, falling by more than 20% in a week. the current price is $4.68, a four-month low.

toncoin was initially deeply bound to telegram, which attracted users' enthusiasm. in the past year, the price of toncoin has risen by 166%, but the price drop caused by this wave of events has caused heavy losses to toncoin holders. according to intotheblock data, about 70% of the addresses holding toncoin purchased it at a price higher than the current price, and only 10% of the addresses holding toncoin are currently making a profit on paper.

there is no doubt that telegram's performance, which is deeply tied to toncoin, will also be negatively affected in the future.

according to telegram's financial report, in 2023, telegram sold part of its toncoin holdings for us$243 million, but as of december 31, 2023, telegram still had nearly us$400 million in encrypted digital assets on its books.

telegram, founded in 2013, is still a private company, and its equity is still 100% owned by its founder pavel durov. therefore, the founder is completely bound to telegram, and there is no risk diversification. since its establishment, telegram has raised a total of about us$2.3 billion through the issuance of convertible bonds. investors include sovereign wealth funds, hedge funds, and investors focusing on the technology field. the huge debt burden is also one of the obvious risks for telegram.

while growing rapidly, the content disseminated on the telegram platform has also been controversial. due to its encrypted nature, in addition to being favored by the cryptocurrency field, telegram has also become a hotbed for crime over the years. countless false information, extremist speech, and organized criminal activities have been spread rampantly on the telegram platform. as the platform operator, telegram has not carried out any substantive and effective intervention and constraints, which has further contributed to the content and disseminators that have nowhere to go on other platforms with strong intervention, making them even more unscrupulous.

durov had previously publicly stated that telegram's valuation was $30 billion. he also said earlier this year that telegram would be profitable next year and would go public in the future. however, the actions taken by law enforcement agencies have put founder durov behind bars, adding greater uncertainty to these plans.